Delayed euro entry 'will not harm industry'

More than half of UK manufacturers believe their business will not be affected significantly if Britain does not join the euro for the foreseeable future, a survey released today shows.

More than half of UK manufacturers believe their business will not be affected significantly if Britain does not join the euro for the foreseeable future, a survey released today shows.

The poll from the Engineering Employers' Federation also picked up a noticeable concern among businesses about the parlous economic state of the eurozone and the increasing volume of Brussels red tape.

Despite this, there was an increase in support for British membership of the single currency as companies came off the fence over the issue. The number wanting to join now or within four years rose to 29 per cent from 21 per cent in its 2001 survey, gaining the bulk of a fall in the "wait and see" camp from 65 to 55 per cent.

The number opposed to entry, either in this parliament or ever, rose to 16 from 14 per cent. The EEF said the balance of opinion has reverted to its position in the joint CBI/EEF survey in 1999.

Stephen Radley, the EEF chief economist, said: "The general mood has been a move mainly from being cautious to making their mind up in favour."

However, the organisation admitted it was not a major shift. Martin Temple, the EEF's director general, said: "I would see it difficult for the Government to win a referendum in this term."

When companies were asked what benefits euro membership would bring, 41 per cent said there would be no effect from joining in the next 12 months.

Delaying entry would not significantly affect most companies, with 56 per cent saying a decision not to join for the foreseeable future would have no impact on their company.

"Overall, these figures do not suggest that many companies expect to see a dramatic impact resulting from a decision to delay euro entry," the EEF said.

The most important factor in deciding whether to join was a competitive exchange rate. Almost half of the companies said they could cope with a rate of ¤1.54 to the pound. Five years ago companies commonly saw ¤1.33 as an acceptable rate.

"This shows the huge strides that manufacturers have made in coping with the weakness of the euro," EEF said.

While 68 per cent said the exchange rate was a key factor, a large number indicated they wanted to see improvements in Europe's economic and bureaucratic performance. And 61 per cent wanted stronger economic growth while just over half a reduction in the volume of social and employment regulations.

Mr Temple said: "There is a lot of uncertainty over the European scenario and the economic and regulatory scenarios are making people more cautious. There's an innate cooling towards the EU even though there's greater comfort with the euro as a currency."

In a separate survey, the accountancy firm Deloitte & Touche found the pound remains over-valued and needs to fall by up to 20 per cent against the euro to allow UK manufacturers to be competitive.